What Is Life Insurance?
What are the Most Common Types of Life Insurance?
Term Life Insurance
Also called term assurance, term life insurance provides financial benefit at a fixed rate of payments for a pre-determined limited period of time (the relevant term). When the pre-determined period of time expires, coverage at the prior premium rate is no longer guaranteed. The policyholder must choose to forego future coverage or potentially obtain future coverage under different payments and/or conditions. If the policyholder dies during the relevant term, the death benefit will be paid to the named beneficiary or beneficiaries.
Generally speaking, term life insurance is the least expensive option for purchasing a substantial death benefit on a coverage amount per premium dollar basis over a specific time period.
Whole Life Insurance
Also called whole of life assurance, whole life insurance is an insurance policy that remains active for the insured’s entire life. In most cases, this type of life insurance requires the policyholder to pay annual premiums into the policy.
Universal Life Insurance
A form of permanent life insurance, universal life insurance carries a cash value. Depending on the terms of the policy, the excess of premium payments over the current cost of the insurance policy is added to the policy’s cash value. The cash value of the policy accrues interest each month, while the policy is debited each month by a Cost of Insurance, or COI, charge, as well as any other required policy charges and/or fees. These debits are made each month regardless of whether a premium has been paid that month. The interest rate on the cash value is determined by the insurer, but must have a contractual minimum of 2%. When the interest rate is pegged to a specific financial index (a stock, bond, or other interest rate index), the policy is known as an “Equity Indexed Universal Life” contract.
Variable Universal Life Insurance
A Variable Universal Life Insurance policy, or VUL, builds cash value over time. In a VUL policy, the cash can be invested in a wide range of different types of accounts, similar to mutual funds. The selection of accounts in which to invest the cash value is up to the contract owner. This type of policy is “variable” because the value of the account varies with the stocks and bonds in which it is invested. It is “universal” because the owner has flexibility in making premium payments, which can vary from nothing up to the maximums defined by the Internal Revenue Code for life insurance.
At SunGate Insurance Agency, our goal is to provide you with the right life insurance policy to offer you and your family’s peace of mind! Contact us today find the policy that works for yo